Chai kings Marketing Strategies

INTRODUCTION

the story of Chai Kings, a tea outlet that serves 15 varieties of tea.The
Chennai-based outlet, which is just four years old, recently for raising $1
million (Rs 7.2 crore) funding from investors The Chennai Angels (TCA) along
with Hyderabad Angels and TiE India Angels. Founded by friends Jahabar
Sadique (41) and Balaji Sadagopan (43), the tea chain with its minimalist
branding serves delicious smelling, hot teas of different kinds – ginger,
masala, iced, in addition to coffee and a few other beverages and snacks,with
prices starting at Rs20.

Jahabar and Balaji had worked together at an IT firm until 2012 and when
they moved to different companies they decided to venture into business.
“They knew being an IT employee would not last for long and they always
wanted to enter into business together. They first went into the franchise
business and at one point we were running 4 Green Trends, a Tony and Guy,
one Subway and a few more places. This did not last for long and they wanted
to start something on our own.

And with Chennai often regarded as the land of filter coffee, the two did not
have any second thoughts when they planned in on tea.

Cutting chai

Chai Kings’ first outlet was opened in October 2016 at Kilpauk. Two more
followed in December in Mount Road and Anna Nagar, and then another in T
Nagar. “They collected in all their life savings for these four outlets… they
knew opening just one will not work. they were confident of making these four
outlets profitable.

At first, like with any new business, things were slow. “People would look at
the signage with its white theme and its tea glass logo, not sure if it was a tea
shop. They would sometimes stand outside with a tea glass in their hand to
encourage walk-ins. Then they placed a big standee of a chai glass. It was a
slow beginning but it picked up steadily.

The entry of food delivery partners like Swiggy and Zomato was a major boost
to their business. “At first they were making Rs 500 daily and slowly it became
Rs 10,000. Their cardboard flasks were priced right and with Swiggy and
Zomato, business started picking up. In the areas they had their outlets, they
were covering about 30-40% of the city,”. By this time they had opened two
more outlets, taking the total to 6.

And soon they were ready to look for funding. “From the beginning they were
not interested in the debt route, they always kept their books clean and
prepared for funding. Places like Chayos and Chai Point are heavily funded
and it was only time they did too.

They approached Chennai Angels.”

With the Rs 2 crore funding from Chennai Angels in July 2018, Chai Kings
was able to open 12 outlets, taking the total to 18. “They added a small
amount of Rs 75 lakhs and opened 5 more. By mid-2019 They had 23 outlets
in Chennai.”

Their second round of funding of $1 million came through this month and the
duo have plans to open 55 outlets on the whole. “They are planning to add
two more cities – Coimbatore and Hyderabad. Perhaps Bengaluru by the
middle of this year,”.

Staying ahead of the game

When Jahabar and Balaji decided to venture into the tea business they spend
a good part of their day downing several glasses of chai at different outlets to
know the market first-hand. “They go full steam when it comes to market
research. Before they started they went almost everywhere – Delhi,
Bengaluru, Dubai, etc. to know the market,”.

And once they did, the two were confident of staying afloat. “Their is not a loss
making model. Compared to other players in the market, where they are
making 30-35% losses compared to the revenue, they are not doing that
badly. Their profitability right now is slower due to expansion,”.

And the costing of their chai Rs 20 is their biggest advantage. “45% of their
costs comes from food. They have another 20% for salary and 18% for rent.
As a company they are looking at experimenting with different models and
different price points in different areas,”.

Chai Kings’ revenue too has steadily improved. “When they started they did
not have this kind of revenue. Now it is between Rs 10 and 12 lakh per store
but earlier it was Rs 6 to 7 lakh. Their online revenue is 40% of their store
revenue and this has tipped the scales.” At present, Chai Kings sells about
25,000 cups of tea per day, with ginger chai taking the top spot.

Chai Kings recently opened its first outlet in Coimbatore inside Brookefields
Mall and will soon be launching 6 stores at once in Hyderabad. “Hyderabad is
10 times Chennai when it comes to the tea drinking habit. There are a lot of
tea drinkers and the market there is different. They plan on launching the
stores together and make some noise to let them know they’re there.
Coimbatore people, however, seem to know them from Chennai so they don’t
need as much advertising as Hyderabad,”.

They are not deterred by the presence of competition. “That is present

everywhere. In Coimbatore, for instance, there’s Velan’s Coffee and they do
phenomenal business. They need to figure out a way to get people to come
in. They do extensive market studies to see what’s available and how they
can give what’s not,”.
“They’ve done 27 outlets in their third year and I think that’s a good number.
The highest number of outlets opened by a brand in one year was by Cafe
Coffee Day – 80 in a year,”.

“When they first started, they were zero percent confident of opening 100
outlets in 5 years. Now 500 outlets seems definitely doable. In their
experience they’ve seen more businesses fail than succeed.I believe success
lies in execution.”

CONCLUSION:

Strategies that can be followed by O2saver:

 Market research
 Engage Customers
 Investment Funding
 Expansion

Promotions that can be followed by O2saver:

 Unique product features

 No compromise in Quality